Free Market Health Care Con

Untargeted deregulation would introduce new ills

Justification: The goal of regulatory reform must be protection of the public good, not just unleashing market forces.

April 20, 1997|By VIKRAM KHANNA

TO PARAPHRASE Ronald Reagan: Bill Jews, there you go again. We cannot make successful health policy in Maryland by relying on cliches and revisionism that considers only selected facts of the complex balance between the market and regulation, and offers a vague "let the market work" solution feasible only in a perfect world with perfect conditions.

The paradox of invoking Adam Smith's name is that Smith supported government intervention in areas of the public good. In his day, this meant government responsibility for things such as physical infrastructure. He likely would have articulated a government role in health care if he had envisioned health insurers that deny necessary care, break their own contracts, create pointless administrative barriers to services, collect and report little publicly useful data and oppose competition.

Or, perhaps the competitive model you really want is to recreate California's health care market in Maryland. That market is heavily dominated by managed care and very unregulated, a real model of free markets in health care: California has higher unused hospital capacity than Maryland, higher costs per hospital stay, a 50 percent higher rate of uninsured people, and rampant cost shifting in hospitals that creates financial instability.

Re-evaluating our state's health care regulatory structure is in order. But the goal of regulatory reform must be be protection of the public good, not just unleashing market forces simply to say we did so or to meet the needs of one market player vs. another.

Market advocates need to back their rhetoric with action and support increased competition in the market, and enhanced consumer participation, knowledge and choice. These are all critical to fair competition, and on these criteria, Mr. Jews' industry has got much ground left to cover.

The Health Services Cost Review Commission (HSCRC), which regulates hospital costs in Maryland, is, as Mr. Jews points out, the only regulatory body of its kind left in the nation. The HSCRC also is uniquely valuable. It oversees a hospital system in which per-capita spending is 17 percent lower than the national average, and it assures all Marylanders access to hospital care should they need it, regardless of health insurance status.

This is a critical consumer protection because the insurance industry refuses to address the full problem caused by the growing number of people who are not covered by health insurance. In fact, the increasingly deregulated and competitive health care market nationally is giving us more uninsured people, not fewer. Doing away with the HSCRC without resolving the problem of lack of insurance will leave more than a half-million Marylanders completely unprotected.

Mr. Jews also questions the value of having the Health Care Access and Cost Commission (HCACC) produce independent report cards on managed care plans, such as health maintenance organizations (HMOs). HCACC's report cards will be the only independent, audited data available to consumers choosing a managed care plan. Without the HCACC report cards, consumers can rely only on industry marketing materials, or the unaudited, unverified data reported to the industry-sponsored National Committee for Quality Assurance.

HCACC's other mission is to examine rising costs in outpatient health care, including physician's services, clinics, and ambulatory surgery centers. Sixty cents of every health care dollar is spent in these settings, and outpatient health care costs are rising alarmingly. It is also an unregulated sector of health care, where the vaunted market forces are apparently having little impact. In fact, 1994 per capita physician spending in Maryland was 25 percent higher than in neighboring states, while per capita hospital spending was 20 percent lower.

In the legislative session just ended, Mr. Jews' company was openly anti-competitive and opposed enhancing public understanding and oversight of the health care market. It opposed a bill to give the public more insight and control over nonprofit health plans and hospitals that convert to for-profit status, which is a nationwide mess. The bill opposed by the Blues would have required independent evaluations of the assets of nonprofit entities seeking to convert to for-profit status, including review by the attorney general's office. Blue Cross Blue Shield also opposed creating community health networks or CHNs.

CHNs made up of doctors and hospitals would have competed with other insurers for contracts with employers and to enroll individual consumers. While no panacea, CHNs were an innovative approach to managed care that would have given existing health insurers a run for their money in some markets. CHNs that could not attract and retain consumers would fail, which is how competition should work. But, rather than compete, Mr. Jews' company helped lead the charge to defeat the CHN bill.

To make the market work, health insurers need to tell consumers more about value, rather than just price. Value in health care is the intersection of price and quality, as measured by patient outcomes. A more important question than whether we spend too much is whether we get value for our dollars.

If not, what do we do about it? Health insurers and providers are dragging their feet in producing, disseminating, and explaining this important information. Legislators, the regulatory system, are essential to move this process forward.

Invoking the "invisible hand" theory of a dead economist, and calling for untargeted deregulation, is as useful for health care as Reagan's claim that trees cause pollution was for environmental policy. It is an empty declaration, not a policy alternative that produces positive change for health care consumers.

Vikram Khanna is a health policy consultant with State Health Policy Solutions L.L.C. in Columbia.

Pub Date: 4/20/97

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